The UK's private sector surged in February, posting its strongest growth in nine months and delivering a significant boost to economic prospects. The latest flash PMI data from S&P Global and the Chartered Institute of Procurement & Supply (CIPS) points to a robust rebound, effectively quelling fears of a prolonged recession.
The composite Purchasing Managers’ Index (PMI), a key health check for the economy, jumped to 53.3 in February, up from 52.9 in January. Any reading above the neutral 50.0 mark indicates expansion. This represents the fastest pace of growth since May 2023 and marks the fourth consecutive month of rising output.
Services Sector Leads the Charge
The powerhouse services sector, which encompasses everything from banking to hospitality, was the primary driver of this impressive performance. Its PMI reading held steady at a strong 54.3, indicating sustained and vigorous growth. New business inflows accelerated at the quickest rate since last May, suggesting underlying demand is strengthening.
While the manufacturing sector continued to face headwinds, its downturn showed signs of easing. The manufacturing PMI, though still in contraction territory, rose to 47.1 from 47.0, and the index for factory output climbed to a promising nine-month high.
Business Confidence and Job Market Respond
This wave of optimism is translating into tangible action. Business confidence for the year ahead soared to its highest level in over two years. Consequently, firms responded by increasing their staffing levels for the second month running, a clear signal that companies are gearing up for sustained growth.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, hailed the data as a clear turning point. "The UK economy is enjoying its strongest growth spell since last spring thanks to a resurgent service sector," he said. "The survey data points to GDP rising by a solid 0.2-0.3% in the first quarter, allaying fears of a recession."
Inflationary Pressures Persist
However, the report also contained a note of caution for the Bank of England. The survey indicated that average cost burdens continued to rise sharply, primarily linked to elevated wage bills. While the rate of selling price inflation eased slightly from January's seven-month peak, it remains high by historical standards, particularly in the services industry.
This sticky inflation within the services sector is likely to be a key concern for policymakers at the Bank of England as they deliberate on the timing for potential interest rate cuts. The strong growth figures, coupled with persistent price pressures, suggest the Bank may opt to maintain a cautious approach.
Overall, the flash PMI paints a picture of an economy gathering momentum and bouncing back with greater vigour than many economists had predicted, setting a positive tone for the rest of the year.
